October 10, 2007

Islam’s Quiet Revolution

by Samuel Gregg D.Phil.

Coherence is not something expected from fundamentalist terrorists. But Osama bin-Laden’s latest missive (September 7^th) to the rest of humanity attained new lows in confusion by articulating ideas normally associated with unrepentant Western European leftists trapped in the 1960s.

Amidst the usual denunciations, al-Qaeda’s leader developed a new theme: an attack on globalization, multinational corporations and capitalism alongside praise of hard-left conspiracy theorist Noam Chomsky.

In bin-Laden’s words, “I tell you: as you liberated yourselves before from the slavery of monks, kings and feudalism, you should liberate yourselves from the deception, shackles and attrition of the capitalist system.”

Leaving aside bin-Laden’s somewhat inadequate grasp of basic Western economic history, he’s probably aware -- and worried -- that several thousand miles to the south-west of his Afghan-Pakistani hideaway, small but important Muslim countries are gradually embracing features of those very same market-systems he despises.

Over the past 15 years, Kuwait, Bahrain, Qatar, and the United Arab Emirates have made significant advances towards becoming open economies. Slowly, they are breaking away from almost total reliance upon oil-export revenues. Each country’s specific path differs, but there are important similarities.

First, all have steadily reduced tariffs and are pursuing Free Trade Agreements with major economic players, including America, China, and Japan. In 2006, an FTA was established between Bahrain and the United States -- the first such agreement between a Gulf state and America.

Second, all have sought to enhance their attractiveness to foreign capital. The UAE is, for example, a tax-free zone for foreign investors. Nor are there any taxes on the movement or repatriation of capital.

The results of these measures are impressive. Over the past 10 years, large numbers of Gulf citizens have opened bank accounts, acquired credit cards, and secured loans for the first time in their lives.

Bahrain’s economy is experiencing annual growth-rates of over 5 percent, and 40 percent of its exports are now non-oil related. Sixty-five percent of the UAE’s economic growth is now in the non-oil sector, of which 50 percent is in services.

Foreign direct investment is also surging into the region. Over the last ten years, Qatar has even embraced the previously-discouraged policy of allowing more foreign investment in its oil fields’ expansion.

But it is not just capital that is flowing into these Gulf countries. Most of the employers and employees in these nations’ growing private sectors are foreigners.

Expatriates account for approximately 40 percent of Bahrain’s population, 50 percent of Kuwait’s, 55 percent of Qatar’s, and more than 80 percent of the UAE’s. People representing more than 150 nationalities live in the UAE alone.

Many expatriates are domestic workers from Southeast Asia. Low-paid by Western standards, they earn far better incomes in the Gulf than in their own countries.

Westerners, however, are increasingly prominent in these expatriate communities. For example, Gulf states have recruited Western specialists to build the their emerging financial and stock markets. In a 2007 McKinsey Quarterly interview, the UAE’s economy minister, Sheika Lubna Al Qasimi (a woman—much, one presumes, to al-Qaeda’s horror) noted that foreign investment “involves a transfer of knowledge and expertise in areas that are not the country’s core competencies.”

Of course, these nations also face significant challenges. Internal Sunni-Shiite political tensions persist, as do arguments about the pace of democratization. Unemployment is high among young native-born citizens. Underground water supplies are also diminishing. Kuwait now imports 95 percent of its water.

Southeast Asian guest-workers endure particular burdens. Their movements are often restricted. There are also cases of non-payment of wages, not to mention physical and sexual abuse.

Yet for all these problems, economic developments in Kuwait, Qatar, the UAE, and Bahrain contrast dramatically with the poverty that characterizes most of the Islamic-Arab world’s state-dominated economies. It may also be facilitating sporadic economic-liberalization in other Arab countries.

The World Bank reports that, despite its vast oil-revenues, notoriously bureaucratic Saudi Arabia recently reduced the official approval time for starting a business from 39 to 15 days. Competition for foreign investment from its tiny eastern neighbors is one likely cause.

Economic liberalization is not a panacea for all the Muslim-Arab world’s problems. These go far beyond economic issues. But while economic liberty and free markets are not sufficient for societies to be free, they are essential.

Fifty percent of new entrepreneurs in the UAE, Sheika Lubna Al Qasimi claims, are women. In all four countries, religious liberty restrictions are also loosening as a concession to non-Muslim expatriates.

Presumably neither bin-Laden nor the Taliban are thrilled by these transformations. Not long ago, such changes would have been considered revolutionary in the Gulf.

But as the nineteenth-century French philosopher Alexis de Tocqueville observed long ago, economic freedom has a way of loosening those bonds that unjustly diminish other legitimate expressions of human liberty -- including, it seems, in Muslim cultures.

Dr. Samuel Gregg is research director at the Acton Institute and author, most recently, of The Commercial Society (2007).

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